While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Quest (DGX)
Trailing 12-Month Free Cash Flow Margin: 10.4%
Processing approximately one-third of the adult U.S. population's lab tests annually, Quest Diagnostics (NYSE: DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.
Why Does DGX Worry Us?
- Underwhelming requisition volumes over the past two years imply it may need to invest in improvements to get back on track
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 10.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Quest is trading at $185 per share, or 17.9x forward P/E. Read our free research report to see why you should think twice about including DGX in your portfolio.
Brink's (BCO)
Trailing 12-Month Free Cash Flow Margin: 1.4%
Known for its iconic armored trucks that have been a fixture in American cities since 1859, Brink's (NYSE: BCO) provides secure transportation and management of cash and valuables for banks, retailers, and other businesses worldwide.
Why Does BCO Give Us Pause?
- 4% annual revenue growth over the last two years was slower than its business services peers
- Free cash flow margin dropped by 3.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $88.49 per share, Brink's trades at 11.9x forward P/E. If you’re considering BCO for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Nvidia (NVDA)
Trailing 12-Month Free Cash Flow Margin: 46.6%
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ: NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Do We Love NVDA?
- Annual revenue growth of 120% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 83.3% outpaced its revenue gains
- Strong free cash flow margin of 45.9% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
Nvidia’s stock price of $134.70 implies a valuation ratio of 30.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as ServiceNow (+178% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
